All posts tagged Lucozade

Here’s Part Two of the report by our colleagues at Dow Jones Banking Intelligence, investigating the potential for tie-ups between drug makers and nutrition specialists. To read the full article you need to subscribe to the service. But here’s a taster.

By Shirlene Tsui and Gregory J Millman

It was only the indignation of Sanofi labor union representatives that forced the French drug company’s joint venture with beverage leader Coca-Cola Co. into the public eye last month. In the wake of Sanofi’s announcement that it would cut 900 jobs and sell or shut its infectious disease laboratory in Toulouse, union representatives criticized the company for “spouting about beauty drinks” and called the foray into the consumer beverage market “shocking.”

Sanofi and Coca-Cola have remained fairly tight-lipped about their partnership, which The Wall Street Journal reported would be a 50-50 venture offering beverages under the brand Beautific Oenobiol to embellish skin, lose weight, improve vitality, and strengthen hair and nails. Note that Sanofi acquired aesthetic vitamin maker Laboratoire Oenobiol S.A.S for undisclosed terms in 2009; the target had revenues of €58 million (US$74 million) the prior year.

The moral indignation of Sanofi’s critics notwithstanding, there is strategic logic in such partnerships.

Pharmaceutical companies face well-publicized growth constraints, both from lower research and development productivity and from the expiration of patent protection on major products. Growth constraints of consumer goods companies, on the other hand, include lower spending in developed countries and fierce competition in emerging markets. By pooling their respective strengths, they may go some way to solving their mutual growth problem.

Consumer companies can bring distribution capabilities and marketing prowess. They understand consumer behavior, and know how to build confidence and familiarity among consumers. Pharma companies for their part understand drug discovery, regulatory affairs and manufacturing systems.

Sanofi certainly was not the first Big Pharma company to enter the health drink space. The U.K.’s GlaxoSmithKline, is the long-standing owner of the Lucozade functional sports and energy drinks brand, which began life as a drink for convalescents in Irish hospitals. And Japanese pharma giant Otsuka Holdings claims the leading share in Asia Pacific’s sports and energy drinks market, with brands such as Pocari Sweat and Oronamin.

Glaxo and Otsuka should explore partnerships similar to that of the Sanofi-Coke deal, but focused on the U.S. market.

Recently reported to be kicking the tires of energy drink maker Monster Beverage Corp., Coca-Cola would be a logical candidate for either. But Dr. Pepper Snapple Group Inc., with year-on-year revenue growth of only 2%, might need the upside even more, and its near-exclusive focus on the U.S. and Latin America could provide a more focused partnership opportunity.